Descending Triangle: The EUR/USD started this week marking a new low on the year at 1.2216. It has since consolidated in a descending triangle as we can see in the 1H chart.
The bearish bias and momentum is maintained.
1) The 200-, 100-, and 50-hour SMAs are sloping down and in bearish alignment.
2) Price is trading under the SMAs.
3) The RSI has tagged below 30, and held below 60, showing persistent bearish momentum.
A break below 1.2215 would break the descending triangle and signal bearish continuation. The width of the triangle at its widest part is 1.23-1.2215, which is 85 pips. A projection of 85 pips lower gives a breakout target of 1.2130 (1.2215 – 85 pips).
There was no key fundamental factors from the Eurozone during the 12/23 session, but there will be some US data.
(click to enlarge; source: forexfactory.com)
Q3 GDP data is expected to be revised up in the final version. A reading around 4.3% is expected, which would be relatively high compared to readings since the financial crisis. A reading in-line with the forecast or better should give the USD some strength and could bring EUR/USD to 1.20.
EUR/USD Reaction: If there is indeed a break below 1.2215, a subsequent pullback should see resistance around 1.2250 if the pair is indeed in bearish continuation. At this point, there is room to run until the 1.2042, 2012-low.
However, failure to hold below 1.2250 with or without a break below 1.2215, puts pressure back on the 1.23 handle.
The GDP data is the most important, but we have a few more US data points:
Durable Goods Orders m/m (Nov.) Forecast: 3.0%, Previous: 0.3%
Core Durable Goods Orders m/m (Nov.) Forecast: 1.1%, Previous: -1.1%
Revised UM Consumer Sentiment (Dec.): 93.5, Previous Estimate: 93.8
New Home Sales (Nov. annualized) Forecast: 461K, Previous: 458K
Core PCE Price Index m/ (Nov.) Forecast: 0.1%, Previous: 0.2%
It seems like data is expected to be decent today, which should be generally good for USD, but remember expectations are priced in and unless we get some positive surprise, the USD might easily run out of breath after already a long bull run.
I think the Core PCE Price Index could important to the USD because this is an inflation index that the Fed watches, and with a rate hike looming in Q2, the Fed will be keen on inflation data. So if the reading comes in above 0.2%, it can bring some USD-strength. A reading of 0.0% or lower however might guide or keep USD-pairs like the EUR/USD back into consolidation.